Lai Sun defaults again on Singapore land deal

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LAI Sun Development and its Singapore joint-venture partner Eltech Electronics have for a third time defaulted on paying for a S$91.5 million (about HK$416 million) government land site bought at the peak of the market and will now hand it back to the government.

It is the first time this has happened in Singapore in more than seven years and reflects the weakened state of the republic's housing market.

Lai Sun and its partner now risk losing all or part of their $22.9 million down-payment, plus possible punitive interest charges for late payment.

A statement by the Housing Development Board (HDB) said it had been informed by the developer it was 'unable to complete the purchase of the land parcel', and added the government's Land Office was now considering its next move.

Kembangan Properties, a 51-49 per cent partnership between Lai Sun and Eltech Electronics' property arm Eltech Land, bid an aggressive $387 per square foot for the 78,757 sq ft condominium site in the Kembangan district of Singapore last July, about 19 per cent more than its nearest rival.

Since then, home prices have cruelly turned, tumbling by about 20 per cent in some districts, and Kembangan has struggled to find bank financing because of the project's perceived risk.

Analysts said Kembangan would need a break-even selling price for apartments of $720-$750 per square foot, whereas the going rate in the area was about $520 per square foot.

The two developers have twice received three-month extensions from the HDB on the outstanding 75 per cent, or $68.62 million, bill.

Every extension carries a 9 per cent annual interest charge, or three points above prime, whichever is higher.

After winning the last extension, Kembangan searched for a third cash-rich partner willing to invest. It even offered a 25 per cent discount on the land cost.

Sources said that, as a result, Lai Sun decided to cut its losses and dump the project altogether.